Contracts concluded without public tender start “singing”

Wire Fence on Bulgarian Border Proves “Golden”

The Bulgarian government has paid colossal and inflated amounts to several selected companies that are building the wire fence along the country’s border with Turkey. The contracts date from 2016. In reality, subcontractors are building the fence at four to five times lower prices. The payments also have been made under very favorable conditions of which other public procurement contractors could only dream.

The companies are connected with the Varna-based Hydrostroy. Payments to them coincide with the Hydrostroy’s acquisition of Vodstroy – 98, which is associated with a certain corpulent lawmaker (MP Delyan Peevski – editor’s note). A Bivol research in public procurement data showed that before being sold, Vodstroy-98 had won bids worth hundreds of millions of European funding, alone or in consortia.

In fact, the difference between the real cost of building the fence and the price paid for it by the government, measured in tens of millions, has gone to the owner of Vodstroy-98.

This ugly picture is “painted” through four contracts for the border facility in the Burgas Region, which Bivol has obtained. Three of them have been given to Patstroy Bourgas and Infra Expert, directly or indirectly connected with Hydrostroy. The contracts have been concluded two months after Hydrostroy officially acquired Peevski’s Vodstroy-98. The fourth contract has gone to a company that has worked in consortia with Hydrostroy and Vodstroy-98.

The amounts under these contracts are known from a Capital daily investigation published a year ago. Now, however, we reveal for the first time the extent of the favorable conditions the State has granted to companies selected without competition. The contracts have clauses for upfront payments in the amount of 50% to 70% and only 5% bank guarantee. One of the contracts also has the unique for Bulgaria guarantee for a remaining payment with a letter of credit.

How much does the fence really cost?

According to the detailed bills of quantities (BoQ) and subcontracting contracts, which Bivol has in its possession, the real value of the fence (without the road) is BGN 133 to 142 per linear meter. This includes digging, laying reinforced concrete, making and dismantling formwork, assembly of fence elements – columns, joints, panels, mesh and barbed wire.

Contract: BGN 672 per linear meter fence

Subcontractors use these realistic estimates in their work, and they include their profit. But the Burgas Regional Administration contracts with the companies building the fence are for the following amounts:

For 52 km only, the difference between the real value of the fence and the price paid for it is BGN 26 million. It is safe to consider this amount unregulated State aid to selected companies. BGN 26 million, which are simply stolen from the Bulgarian budget because, as it is known, the European Commission is not granting subsidies for building the fence.

Subcontractors have been used extensively and have been concealed by the Regional Administration – Burgas, despite the obligation to declare them. In response to Access to Public Information Act (APIA) questions, Burgas Regional Governor Valcho Cholakov claims that he has not been provided and has no information and data on subcontractors, while the companies that have received payments under the contracts are the same ones that have concluded them.

What are the companies that have received millions?

Infra Expert’s sole owner is Ivo Krumov Mihaylov. Over the years, this company has changed its name and address frequently, sharing several times an address with Hydrostroy in Sofia – 117 “Evlogi and Hristo Georgievi” Blvd. A connection with Hydrostroy is also found through the company ID Trade where Ivo Mihaylov has been co-manager with the former manager of Hydrostroy, Dobromir Dimitrov Petrov.

Infra Expert had a capital of just BGN 250 until July 2016 when it was transformed into a sole owner joint stock company (EAD) and suddenly increased its capital to BGN 50,050. Only a month later, it signed its first contract for the fence and the road to it. It is for a total of BGN 10,630,338 (12.5 km with a 50% upfront payment). Three months later, on November 17, 2016, Infra signed a second contract to build another 2.3 km against another 1,998,682. Under this contract, the upfront payment is 70%!

Patstroy Burgas, which is 100% owned by Hydrostroy, has signed a contract for BGN 15,798,776 for a 21.9 km with 50% upfront payment and 5% bank guarantee.

The group Patengineeringstroy, established on June 23, 2016, includes Bitumina GmbH, AUSTRIA, and the company Patengineeringstroy, based in the northeastern city of Targovishte. The latter is owned by Ivan Tsvyatkov Ivanov and Grigor Tsvetkov Ivanov and has participated in construction consortia with Hydrostroy and Vodstroy -98. Pathengineeringstroy has been tasked to build 15.7 km of the fence for BGN 11,881,039 with an upfront payment of 50% and a 5% bank guarantee.

Paying #WHO

“Hydrostroy” officially acquired Vodstroy-98 in early June 2016 after the Commission for Protection of Competition (CPC) approved the announced deal in only eight working days.

Bivol’s source, familiar with the details of the aforementioned affair of pouring State money into the right companies and providing the contracts, also claims that Hydrostroy’s acquisition of Vodstroy’s-98 shares has been mainly made with working capital of the companies in the group Patstroy Burgas and Infra Expert. These are precisely the amounts received upfront under contracts of the Regional Administration of Burgas for building the fence, transferred into accounts in UniCredit Bulbank.

Besides being expensive, the fence is also useless and will not stop refugees, should Turkish President Erdogan decide to open the “floodgates”

To sum it up, all facts and circumstances show that in order for Hydrostroy to enrich a corpulent lawmaker, the State has rushed shady payments from the budget to Hydrostroy Group. In addition, the huge difference with the real value of construction and assembly works has provided for a long chain of subcontractors connected with the government. This theft from the budget has also affected the quality of the construction works, which, as it has emerged, are deplorable.

Bivol calls on the institutions in charge to carry out an objective and competent probe because these circumstances are easily verifiable. Sources, wishing to remain anonymous, would testify if there is an effective guarantee for their protection.

Of course, such a probe is unlikely to take place, bearing in mind all known and backstage dependencies of the Bulgarian Prosecutor’s Office.

Throwing dust in our eyes and classifying the drain

In order to conceal the fraudulent contracts, the fence was declared an object of national importance on Prime Minister Boyko Borisov’s personal order. The scandalous contracts and payments to #WHO were classified. The fence became a strategic site of national security importance under the authority of the National Security Agency (DANS). In this sense, we do not exclude claims against our media over the publication of the contracts. However, we are doing it because of the great public interest.